Pension Buy-Outs Rise to Almost $4 Billion
Group pension buy-outs have never been higher in the second quarter than they were this year. The LIMRA Secure Retirement Institute reported on Aug. 25 that the buy-outs amounted to $3.8 billion
, the new high for the second quarter of any year since records began more than 20 years ago.
This continues a trend that has gone on for five years, LIMRA says, of an increasing number of pension buy-outs in the first half of the year. For instance, in the first and second quarter of 2014, 95 pension plan sponsors converted their plans into group annuity contracts; this year, 107 did so.
LIMRA has found that many more small and medium-sized companies are interested in such transactions, according to its research analyst Michael Ericson. This, he says, is part of the explanation for the increase in buy-outs in the first and second quarters.
LIMRA also points out the pronounced effect that a single deal can have on buy-out statistics. For example, in the second quarter of this year, Kimberly-Clark’s group annuity conversion contributed to group pension buy-outs in the second quarter of 2015 being a whopping 700% higher than those in the same period in 2014. And in 2012, the transfer to Prudential by General Motors and Verizon of their group pension obligations pushed sales of group buy-outs up by almost $36 billion.